BBVA Uses Ethereum To Complete €150 Million Syndicated Loan

The transaction brought together several big banks and represents BBVA’s second major blockchain loan pilot this year.

One of Spain’s largest banks, Banco Bilbao Vizcaya Argentaria (BBVA), announced today, November 7, the completion of what it says is the first “blockchain-based syndicated loan arrangement.”

Though the announcement states, “This is the first time a real life deal has actually been done,” the deal apparently took place on the Ethereum testnet rather than on the mainnet.

The syndicated loan represents something of a continuation of previous blockchain experimentation by BBVA. In April, the bank announced it had completed a global corporate loan transaction on the Ethereum testnet. The aim of this pilot program was to test how blockchain technology could increase the transparency, speed, and efficiency of transactions.

This recently completed syndicated loan differs in that, instead of involving just one lender, a syndicated loan allows several financial institutions to pool money together and lend it to a single borrower.

The financial institutions participating with the BBVA to complete this syndicated loan were Japan-based Mitsubishi UFJ Financial Group (MUFG) and France’s BNP Paribas, which along with BBVA collectively lent €150 million to Red Eléctrica Corporation, Spain’s national electrical grid operator. Legal advisors Linklaters S.L.P. and Herbert Smith Freehills LLP reportedly had access to the blockchain platform as well.

Although BBVA does not specifically state how the syndicated loan was completed, the announcement does broadly outline the steps involved. It states that blockchain technology allows for each step of a negotiation to be recorded along with user codes and timestamps of when it was completed. All participants have access to the blockchain, and “once the contract is signed, a unique document identifier is recorded in Ethereum’s public blockchain network (specifically, in its test network, ‘testnet’) to guarantee its immutability against third parties while safeguarding its confidentiality at all times.”

Besides using blockchain technology to complete different types of loans, BBVA is also one of the founding members of the Enterprise Ethereum Alliance. In May 2017, the bank joined a non-profit venture called Red Lyra. Its intention in doing so was to develop open-source blockchain platforms that could improve specific business practices for financial institutions, utility services, and telecommunication service providers.